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And yet the fiscal multiplier of money spent by the government is >1. Per each dollar spent by the state, there's a economic growth above one (btw, there's a pa

• snapplebobapple 1y ago
  Yah, I personally don't think fiscal multiplier is a great measurement because it pushes you towards thinking about government spending in a couple of wrong ways. First of all, it's not correct to say government spending is good because it causes an increase in national income greater than the spending. The correct comparison is to what would have happened without the spending and it's both hard to figure out and not very clear that the government spent that money better than had the left it alone and the populace deployed their own cash/didn't adjust their own capital deployment to account for the extra debt the government took on in their name. This leads to the second problem with it and that's that the next thing someone who likes this measure will say is "the spending is exogenous" which is neither true or a good model of reality. Also, looking at your paper I see the estimate range has 1 in it in all cases so I question the actual correctness of your statement. If one is in the likely range of effect you can't say spending is stimulating additional anything.